In Kaiser v. Cascade Capital, LLC, 2021 U.S. App. LEXIS 6754, the Ninth Circuit Court of Appeals reversed the ruling of the District Court for the District of Oregon that granted a motion to dismiss where the District Court reasoned the debt collector did not violate the FDCPA prohibitions on attempting to collect on a time barred debt because the state statute of limitations had been unclear when the debt collector attempted to collect the debt.
The Ninth Circuit first concluded that under Oregon law, the Oregon Supreme Court would hold the four-year statute of limitations would apply to a suit on the consumer’s debt and therefore the debt was time-barred at the time of the debt collector’s conduct. The court then concluded the debt collector’s conduct violated the FDCPA:
Both suing and threatening to sue on time-barred debts also misrepresent the legal enforceability of those debts, and thus are false or misleading under 15 U.S.C. § 1692e. Suing or threatening to sue on a debt implicitly represents that the debt is legally enforceable, at least absent a clear disclaimer to the contrary. “Whether a debt is legally enforceable is a central fact about the character and legal status of that debt. A misrepresentation about that fact thus violates the FDCPA.” McMahon v. LVNV Funding, LLC, 744 F.3d 1010, 1020 (7th Cir. 2014). In embracing this conclusion, we join the unanimous consensus of our sister circuits. See, e.g., Holzman v. Malcolm S. Gerald & Assocs., Inc., 920 F.3d 1264, 1270 (11th Cir. 2019) (“There is no question that these provisions [of 15 U.S.C. § 1692e] prohibit a debt collector from suing or threatening to sue on a time-barred debt, and federal courts have uniformly so held.”).
The court rejected the debt collector’s defense that unless a debt collector “‘knew or should have known’ that the litigation was time barred,” its filing of litigation or threating litigation cannot violate the FDCPA:
The FDCPA makes debt collectors strictly liable for misleading and unfair debt collection practices. Clark v. Cap. Credit & Collection Servs., Inc., 460 F.3d 1162, 1175–76 (9th Cir. 2006). A “knew or should have known” standard would create a scienter element for a violation, which is incompatible with strict liability. S.E.C. v. CMKM Diamonds, Inc., 729 F.3d 1248, 1256 (9th Cir. 2013) (rejecting a proposed “knew or should have known” standard in the context of strict liability under the Securities Act of 1933). As a result, the plain text of the FDCPA cannot support a “knew or should have known” standard.
However, the court held a mistake about the statute of limitations could be asserted as a bone fide defense, despite the fact that normally a mistake about the law is insufficient to raise the defense:
By contrast, the ignorance-of-the-law “maxim does not normally apply where a defendant ‘has a mistaken impression concerning the legal effect of some collateral matter and that mistake results in his misunderstanding the full significance of his conduct.’” Rehaif, 139 S. Ct. at 2198 (quoting 1 LaFave & Scott, Substantive Criminal Law § 5.1(a)). In such cases, “where the defendant is ignorant of an independently determined legal status or condition that is one of the operative facts of the crime . . . the mistake of the law is for practical purposes a mistake of fact.” United States v. Fierros, 692 F.2d 1291, 1294 (9th Cir. 1982); see also United States v. Currier, 621 F.2d 7, 9 n.1 (1st Cir. 1980) (describing earlier cases in which “an apparent ‘mistake of law’ was actually a ‘mistake of fact’ [and therefore could be asserted as a defense] in that the mistake pertained to a question of status which was determined by a law other than the one under which the defendant was prosecuted”). Thus, when a crime has a mens rea requirement, a defendant must have that mens rea as to such “a ‘collateral’ question of law.” Rehaif, 139 S. Ct. at 2198.
[The debt collector] has allegedly violated the prohibition against misrepresenting the legal enforceability of the debt, 15 U.S.C. § 1692e, and the prohibition against “unfair” collection tactics, id. § 1692f. These allegations necessarily implicate a legal element entirely collateral to the FDCPA: the time-barred status of the debt under state law. This collateral legal element falls outside the ignorance-of-the-law maxim described in Jerman.